United States v. Holy Land Foundation for Relief & Development

Case: 11-10535 Document: 00512286517 Page: 1 Date Filed: 06/25/2013

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

June 25, 2013

No. 11-10535 Lyle W. Cayce

Clerk

UNITED STATES OF AMERICA,

Plaintiff - Appellant

v.

HOLY LAND FOUNDATION FOR RELIEF AND DEVELOPMENT, also

known as HLF; SHUKRI ABU BAKER; GHASSAN ELASHI; MUFID

ABDULQADER; ABDULRAHMAN ODEH,

Defendants - Appellees

JENNY RUBIN; DEBORAH RUBIN; DANIEL MILLER; ABRAHAM

MENDELSON; STUART E. HERSCH; RENAY FRYM; NOAM ROZENMAN;

ELENA ROZENMAN; TZVI ROZENMAN,

Appellees

Appeal from the United States District Court

for the Northern District of Texas

Before WIENER, CLEMENT, and PRADO, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

Appellees (“the Rubins”) are victims of a terrorist attack perpetrated by

the terrorist group Hamas in 1997 at an outdoor pedestrian mall in Jerusalem.

Appellee the Holy Land Foundation (“HLF”) is a designated terrorist

organization that the Department of the Treasury has found to act for or on

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behalf of Hamas by serving as its fundraising arm in the United States. After

obtaining a judgment against Hamas in the district court for damages resulting

from the attack, the Rubins requested that the court issue a Writ of

Garnishment against the assets of Hamas and HLF. Although the court issued

the writ, the Rubins could not execute against HLF’s assets because those assets

previously had been restrained under 21 U.S.C. § 853 to preserve their

availability for criminal forfeiture proceedings. The Rubins filed a third-party

petition under § 853(n) to assert their interests in the restrained assets and, in

response, the government filed a motion to dismiss. The district court denied the

government’s motion to dismiss the Rubins’ petition and vacated the preliminary

order of forfeiture, holding that the Terrorism Risk Insurance Act of 2002

(“TRIA”) allows the Rubins to execute against HLF’s assets notwithstanding the

government’s forfeiture proceedings. The government appealed and we

REVERSE, holding that the Rubins cannot recover under either 21 U.S.C. § 853

or the TRIA.

I. FACTUAL BACKGROUND

A. The Rubins’ proceedings against Hamas

The Rubins are nine American citizens who suffered severe harm as a

result of a triple suicide bombing carried out by the terrorist group Hamas on

September 4, 1997 at an outdoor pedestrian mall in Jerusalem, Israel. In May

2002, the Rubins brought a lawsuit against Hamas under the civil remedies

provisions of the Anti-Terrorism Act of 2001, 18 U.S.C. § 2333, and in 2004 they

won a judgment in their favor for $214.5 million. Rubin v. Hamas-Islamic

Resistance Movement, No. Civ. A. 02–0975(RMU), 2004 WL 2216489, at *3–4

(D.D.C. Sept. 27, 2004). Subsequently, the Rubins registered their judgment in

the Southern District of New York, Western District of Washington, District of

New Jersey, District of South Carolina, and Northern District of Illinois. The

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Rubins then requested that the Western District of Washington issue a Writ of

Garnishment against Saturna Capital, which was holding funds belonging to

HLF.

B. Federal proceedings against HLF

On December 4, 2001, shortly before the Rubins’ trial, the Secretary of the

Treasury determined that HLF “acts for or on behalf of” Hamas and designated

HLF a “Specially Designated Terrorist” under Executive Order 12947 and a

“Specially Designated Global Terrorist” under Executive Order 13224.1 See Holy

Land Found. for Relief & Dev. v. Ashcroft, 219 F. Supp. 2d 57, 64 (D.D.C. 2002).

More specifically, the Treasury Secretary found that HLF functions as the

fundraising arm of Hamas in the United States, and, pursuant to the authority

granted to him by the Executive Orders, instructed the Office of Foreign Assets

Control (“OFAC”) to “block” all of HLF’s funds, accounts, and other property. Id.

Following HLF’s designation as a terrorist group and the blocking of its

assets, the U.S. government initiated a criminal investigation into HLF’s

activities in the United States. On July 26, 2004, before the Rubins obtained

their civil judgment, the government filed a forty-two count indictment against

HLF in the Northern District of Texas, which informed HLF of the government’s

intent to seek forfeiture of “all property, real and personal, involved in the

[alleged] money laundering or monetary transaction offenses, and all property

traceable to such property.” In accordance with this indictment, on September

23, 2004, OFAC issued a license authorizing the government to pursue criminal

forfeiture of HLF’s assets which had been blocked by Executive Orders 12947

and 13224. OFAC issued this license four days before the district court entered

1

Hamas had already been designated a “Specially Designated Terrorist” by President Clinton

on January 23, 1995, see Executive Order 12947 (issued pursuant to the authority granted to the

President under the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. § 1701, et seq.),

and a “Specially Designated Global Terrorist” by President Bush on September 23, 2001, see Executive

Order 13224. By virtue of these designations, Hamas’s and HLF’s assets were “blocked.”

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a civil judgment in favor of the Rubins against Hamas on September 27, 2004.

The government then filed, and the district court granted, an “Ex parte

Application for Post-Indictment Restraining Order” against HLF’s assets. See

21 U.S.C. § 853(e)(1)(A).2

Several years later, on November 24, 2008, a federal jury found HLF guilty

of various terrorism-related crimes, tax-related crimes, conspiracy to commit

money laundering, and substantive money laundering offenses. The jury also

returned a special verdict determining that $12.4 million in HLF assets was

derived from proceeds traceable to the commission of the money laundering

offenses.

On February 5, 2009, the district court entered a preliminary order of

forfeiture against HLF’s assets under 18 U.S.C. § 982(a)(1).3 Pursuant to this

order, the government was awarded a $12.4 million judgment, the funds in

HLF’s bank accounts were deemed forfeited to the government, and the

government was granted authorization to seize HLF’s assets. Third parties with

judgments against Hamas, including the Rubins, could only assert their alleged

interests in the forfeited assets by filing ancillary petitions under 21 U.S.C.

§ 853(n). The Rubins filed such a petition, conceding that they could not satisfy

the requirements for prevailing as a third-party creditor under § 853(n), but

nonetheless maintaining that they were entitled to enforce their prior civil

2

This statutory provision provides that, “[u]pon application of the United States, the court may

enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take

any other action to preserve the availability of property [subject to criminal forfeiture]—(A) upon the

filing of an indictment or information charging a violation . . . for which criminal forfeiture may be

ordered under this section and alleging that the property with respect to which the order is sought

would, in the event of conviction, be subject to forfeiture under this section.” 21 U.S.C. § 853(e)(1).

3

Upon a party’s conviction for certain money laundering offenses, 18 U.S.C. § 982(a)(1) directs

the court to order the guilty party to “forfeit to the United States any property, real or personal, involved

in such offense, or any property traceable to such property.” The forfeiture of property under this section

is governed by 21 U.S.C. § 853, which provides that “[a]ll right, title, and interest in property described

in subsection (a) of this section vests in the United States upon the commission of the act giving rise to

forfeiture under this section,” id. at § 853(c).

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judgment against HLF’s assets under § 201 of the TRIA.4 The government

moved to dismiss the Rubins’ petition on the ground that they could not satisfy

the statutory requirements for prevailing in the ancillary proceeding under 21

U.S.C. § 853(n)—the only means by which the Rubins could assert their interest

in HLF’s forfeited assets.

On April 27, 2011, the district court denied the government’s motion to

dismiss the Rubins’ petition, and also vacated the preliminary order of forfeiture

that had been granted to the government after HLF’s conviction. The court

concluded that, under the TRIA, “[HLF’s] assets are subject to attachment by

plaintiffs with judgments ‘notwithstanding any other provision of law,’ such as

criminal forfeiture law.” United States v. Holy Land Found. for Relief & Dev.,

No. 3:04–CR–0240–P, 2011 WL 3703333, at *6 (N.D. Tex. Aug. 19, 2011). The

court subsequently amended its Memorandum Opinion and Order to state that

the preliminary order of forfeiture would reflect this holding. The government

timely appealed, and the district court stayed its order pending the outcome of

the appeal.

II. STANDARD OF REVIEW

We review de novo a district court’s legal conclusions regarding

jurisdiction. Filer v. Donley, 690 F.3d 643, 646 (5th Cir. 2012). In evaluating a

4

The relevant provision of the TRIA states that:

Notwithstanding any other provision of law . . . any property with respect to

which financial transactions are prohibited or regulated pursuant to section 5(b)

of the Trading with the Enemy Act (50 U.S.C. App. 5(b)), section 620(a) of the

Foreign Assistance Act of 1961 (22 U.S.C. 2370(a)), sections 202 and 203 of the

International Emergency Economic Powers Act (50 U.S.C. 1701-1702), or any

other proclamation, order, regulation, or license issued pursuant thereto, shall

be subject to execution or attachment in aid of execution of any judgment

relating to a claim for which a foreign state (including any agency or

instrumentality or such state) claiming such property is not immune[.]

Pub. L. No. 107–297, 116 Stat. 2322.

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district court’s disposition of a petition filed under 21 U.S.C. § 853(n), we review

factual findings for clear error and legal conclusions de novo. United States v.

Ramunno, 599 F.3d 1269, 1273 (11th Cir. 2010); United States v. Nava, 404 F.3d

1119, 1127 n.3 (9th Cir. 2005). Additionally, we review de novo a district court’s

interpretation and application of TRIA § 201 and 21 U.S.C. § 853. See United

States v. Gore, 636 F.3d 728, 730 (5th Cir. 2011) (reviewing “de novo the district

court’s interpretation and application of a statute”).

III. ANALYSIS

A. Jurisdiction to hear the appeal

On April 27, 2011, the district court issued a Memorandum Opinion and

Order denying the government’s motion to dismiss the Rubins’ third-party

ancillary petition under 21 U.S.C. § 853(n). In that Order, the court also vacated

the preliminary order of forfeiture that it had previously entered after HLF’s

criminal conviction. The government, recognizing that § 853(n)(6) requires a

court to amend a preliminary order rather than vacate it, moved for an

amendment of the Memorandum Opinion and Order to show that the

preliminary order was amended rather than vacated. On May 26, 2011, prior to

the district court’s ruling on the motion to amend, the government filed a notice

of appeal from the original Memorandum Opinion and Order. On August 19,

2011, the district court granted the government’s motion to amend and stated

that the preliminary order of forfeiture would be amended rather than vacated.

The resulting Amended Memorandum Opinion and Order is identical to the

original order except for the final sentence, which states that “the court will

amend its Preliminary Order of Forfeiture” rather than “[t]he court hereby

VACATES the Preliminary Order of Forfeiture.”

The Rubins argue that we lack jurisdiction over the instant appeal since

the government failed to file a new or amended notice of appeal after the district

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court granted its Rule 59(b) motion to amend the Memorandum Opinion and

Order. The Rubins base their argument on Federal Rule of Appellate Procedure

4(a)(4)(B)(ii), which requires a party “intending to challenge an order disposing

of [a motion to amend under Federal Rule of Civil Procedure 59(b)] or a

judgment’s alteration or amendment upon such a motion [to] file a notice of

appeal, or an amended notice of appeal.” FED. R. APP. P. 4(a)(4)(B)(ii). The

Rubins’ argument fails because the government never sought to: (1) challenge

the court’s ruling on its Rule 59(b) motion to amend, which in fact was decided

in the government’s favor, or (2) challenge the court’s alteration of its

Memorandum Opinion and Order, which merely resulted in the court’s

substitution of the word “vacate” for “amend.” The government’s appeal was

instead directed at the substance of the district court’s original Memorandum

Opinion and Order denying the government’s motion to dismiss. Since the

government did not seek to challenge the disposition of its Rule 59(b) motion to

alter or amend the Memorandum Opinion and Order, Rule 4(a)(4)(B)(ii) is

inapplicable and imposes no jurisdictional bar to our hearing the government’s

appeal. The applicable Federal Rule of Appellate Procedure is 4(a)(4)(B)(i), not

4(a)(4)(B)(ii).

Under Rule 4(a)(4)(B)(i), the government’s notice of appeal was rendered

“dormant” at the time that the government filed its Rule 59(b) motion to amend.

See Ross v. Marshall, 426 F.3d 745, 751–52 (5th Cir. 2005) (“Our court has found

that the timely filing of a [Rule 59(b) motion] suspends or renders dormant a

notice of appeal until all such motions are disposed of by the trial court. This

holds true regardless of whether the motion was filed before or after the notice

of appeal.”). Once the court ruled on the motion to amend, the government’s

notice of appeal became effective to appeal the original Memorandum Order and

Opinion. See FED. R. APP. P. 4(a)(4)(B)(i) (“If a party files a notice of appeal after

the court announces or enters a judgment—but before it disposes of [a Rule 59(b)

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motion to amend]—the notice becomes effective to appeal a judgment or order,

in whole or in part, when the order disposing of the last such remaining motion

is entered.”). Thus, the government’s notice of appeal was proper and timely,

and we may exercise jurisdiction over the appeal.

B. Recovery under 21 U.S.C. § 853 or the TRIA

The district court denied the government’s motion to dismiss on the

ground that the TRIA relieved the Rubins of having to satisfy their burden for

recovery under 21 U.S.C. § 853(n). However, as the Rubins cannot prevail under

either § 853 or the TRIA, we reverse the district court’s judgment.

i. 21 U.S.C. § 853(n) does not provide the Rubins with a basis to

prevail in the ancillary proceeding.

The criminal forfeiture statute bars a third party claiming an interest in

forfeitable property from intervening in the criminal trial or appeal, and also

prohibits a third party from commencing a separate action against the United

States on the basis of that party’s interest in the property. 21 U.S.C. § 853(k),

(n). Under the statute, the only way in which a third party may assert an

interest in the forfeited property is through an ancillary proceeding. See id.;

Libretti v. United States, 516 U.S. 29, 44 (1995) (“Once the Government has

secured a stipulation as to forfeitability, third-party claimants can establish

their entitlement to return of the assets only by means of the hearing afforded

under 21 U.S.C. § 853(n).”).

A third party can prevail in the ancillary proceeding in one of two ways:

(1) it can establish priority over the interest of the United States by showing that

it had an interest in the property superior to the defendant’s interest at the time

the defendant committed the crime, 21 U.S.C. § 853(n)(6)(A); or (2) it can

establish that it was a bona fide purchaser for value of the property, and, at the

time of purchase, had no reason to believe that the property was subject to

forfeiture, id. at § 853(n)(6)(B). If a third party is unable to satisfy either

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§ 853(n)(6)(A) or (B), it cannot prevail in the ancillary proceeding. See United

States v. Huntington Nat’l Bank, 574 F.3d 329, 334 (6th Cir. 2009) (“[T]he

questions potentially at issue in a § 853(n) proceeding are limited . . . [as]

§ 853(n)(6) offers just two grounds for relief.”). If the ancillary proceedings

reveal that a third party has a superior interest in the property or is a bona fide

purchaser for value, the district court will amend the forfeiture order. 21 U.S.C.

§ 853(n)(6). In the absence of this showing, the United States acquires clear title

to the property. Id. at § 853(n)(7).

The Rubins conceded in district court and in their appellate brief that they

neither had an interest in HLF’s assets at the time the crimes were committed

nor were bona fide purchasers for value of HLF’s assets after the crimes were

committed. There is no basis under 21 U.S.C. § 853(n) for the Rubins to

establish their interest in the forfeited property.

ii. The TRIA does not provide the Rubins a basis to assert their interest

in the forfeited property.

The Rubins maintain that § 201 of the TRIA permits execution against

HLF’s funds notwithstanding their inability to satisfy 21 U.S.C. § 853(n). Under

§ 201(a), assets are made available for attachment and execution if they are

“blocked assets of th[e] terrorist party.” The term “blocked asset” means: “any

asset seized or frozen by the United States under section 5(b) of the Trading

With the Enemy Act . . . or under sections 202 and 203 of the International

Emergency Economic Powers Act.” TERRORISM RISK INSURANCE ACT OF 2002,

Pub. L. No. 107-297, title II, § 201(d)(2)(A), 116 Stat. 2337. By its terms, § 201

does not provide for execution against assets that are not blocked.

The ambit of the TRIA is clear: It operates to reach those funds which

have been blocked by the government pursuant to one of two statutes. See

Estate of Heiser v. Islamic Republic of Iran, 807 F. Supp. 2d 9, 18 (D.D.C. 2011)

(“TRIA . . . applies only to ‘blocked assets,’ which it defines as ‘any asset seized

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or frozen by the United States.’”). The TRIA specifically limits the definition of

“blocked” assets to those that are seized or frozen under § 5(b) of the Trading

with the Enemy Act or § 202 or § 203 of the IEEPA—“a limitation that this

Court cannot ignore.” Weinstein v. Islamic Republic of Iran, 299 F. Supp. 2d 63,

75 (E.D.N.Y. 2004); see also Stansell v. Revolutionary Armed Forces of Colom.,

704 F.3d 910, 915 (11th Cir. 2013) (“[The TRIA] defines what a ‘blocked asset’

‘means,’ not what the term merely could ‘include.’ When a statutory definition

declares what a term ‘means’ rather than ‘includes,’ any meaning not stated is

excluded.”). Moreover, the TRIA “imposes no obligation on the President to

maintain [blocked] funds for future attachment [by judgment creditors].” Smith

v. Fed. Reserve Bank of N.Y., 346 F.3d 264, 271 (2d Cir. 2003). Nor does it reach

those funds which the government has been given authorization to control

through another means.

In 2001, the government deemed HLF to be an arm of Hamas and blocked

its funds pursuant to the IEEPA. When the government initiated its criminal

investigation into HLF’s activities in 2004, HLF’s assets were still blocked. We

must determine whether the government essentially unblocked HLF’s assets

when it obtained a restraining order under 21 U.S.C. § 853(e)(1)(A) to pursue the

criminal forfeiture of those assets.

Under § 853(e)(1)(A), the government can request the restraint of assets

subject to forfeiture under § 853(a) to preserve those assets’ availability for

criminal forfeiture proceedings. See United States v. Parrett, 530 F.3d 422, 429

(6th Cir. 2008) (“[The] pre-trial retention of assets believed to be tainted and,

therefore, forfeitable, is permissible.” (quoting United States v. Ford, 64 F. App’x

976, 982 (6th Cir. 2003)). A judicial order authorizing the restraint of those

assets initiates the forfeiture proceedings and secures the government’s interest

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so that, upon conviction, the relation-back doctrine can operate as was intended.5

See United States v. Jarvis, 499 F.3d 1196, 1203 (10th Cir. 2007) (“The

government . . . has the ability to seek a protective order to restrain tainted

assets prior to trial in order to ensure the availability of the tainted property in

the event of the defendant’s conviction.”). Here, the government filed its

indictment and received a judicial order authorizing the restraint of HLF’s

assets in September 2004, several days before the Rubins received their civil

judgment against HLF.

The Rubins argue that the filing of the indictment and forfeiture demand

did not have any legal effect on HLF’s assets because the executive blocking

orders and accompanying regulations prohibit essentially all transactions

involving blocked property. See Executive Orders 12947, 13224; 31 C.F.R.

§ 594.201. This argument is directly belied by the text of the applicable

5

Title 21 U.S.C. § 853(c)’s relation-back provision requires that “[a]ll right, title, and

interest in property described in subsection (a) of this section vests in the United States upon

the commission of the act giving rise to forfeiture.” The Supreme Court has observed that this

section “reflects the application of the long-recognized and lawful practice of vesting title to

any forfeitable assets, in the United States, at the time of the criminal act giving rise to

forfeiture.” Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 627 (1989). “It is

a doctrine of retroactive vesting of title that operates only upon entry of the judicial order of

forfeiture or condemnation.” United States v. 92 Buena Vista Ave., 507 U.S. 111, 131 (1993)

(Scalia, J., concurring).

Both parties spend a great deal of time discussing the application of the relation-back

doctrine under the criminal forfeiture statute. The government argues that, because the

relation-back doctrine operates to vest title to HLF’s money-laundering proceeds as of the time

Hamas began to engage in those activities, those funds never became blocked property under

the IEEPA. The Rubins counter that the relation-back provision is merely a “legal fiction” that

should not be applied in situations where, as here, a statute clearly prioritizes the interests

of terrorist victims over those of the government in allocating a terrorist organization’s assets.

We need not discuss the merits of these arguments in great detail. Supreme Court precedent

indicates that § 853(c)’s relation-back provision takes effect “only upon entry of the judicial

order of forfeiture or condemnation.” 92 Buena Vista Ave., 507 U.S. at 131. At the time the

Rubins sought to execute against HLF’s assets, the relation-back provision had not yet

operated to transfer ownership of those assets to the government. For our purposes, it is

sufficient to show that, regardless of the exact point in time at which the relation-back

doctrine became effective, the government’s restraint of HLF’s assets took those assets out of

the reach of the TRIA.

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regulations, which provide an exception to the prohibition on transferring

blocked property when that transfer is authorized by license. See 31 C.F.R.

§§ 594.201, 594.202, 595.202; see also Estate of Heiser, 807 F. Supp. 2d at 18 n.6

(recognizing that, in certain situations, an OFAC-issued license authorizing a

transaction involving blocked funds has the effect of removing the prohibition on

dealing in those funds). One such provision reads:

[A]n appropriate license . . . issued by or pursuant to

the direction or authorization of the Director of the

Office of Foreign Assets Control before, during, or after

a transfer [of blocked property] shall validate such

transfer or make it enforceable to the same extent that

it would be valid or enforceable but for the provisions of

the International Emergency Economic Powers Act.

31 C.F.R. § 594.202; see also id. at § 594.201 (“Unless otherwise authorized . . .

by a specific license expressly referring to this section, any dealing in any

security . . . held within the possession or control of a U.S. person . . . whose

property or interests in property are blocked pursuant to § 594.201(a) is

prohibited.” (emphasis added)).

The government obtained such a license (the “forfeiture license”) from

OFAC on September 23, 2004, which authorized the government “to pursue

criminal forfeiture of the assets of the Holy Land Foundation for Relief and

Development (‘HLF’) blocked pursuant to” Executive Orders 12947 and 13224.

The license further authorized the government to pursue “restraining orders” in

order to preserve the assets for criminal forfeiture. Notwithstanding the status

of HLF’s assets as blocked, the government’s receipt of a license from OFAC

restrained those assets and permitted the government to proceed with the

criminal forfeiture process.

By the time that the Rubins obtained their judgment against HLF on

September 27, 2004, the government had restrained HLF’s assets to preserve

them for potential criminal forfeiture. As the Rubins concede in their brief, the

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government’s restraining order became legally effective before the Rubins

received a judgment in their favor giving them the right under the TRIA to

execute against HLF’s assets. Once an indictment had been filed and the assets

restrained, victims of terrorism could no longer execute against those assets

under the TRIA. See Estate of Heiser, 807 F. Supp. 2d at 18 n.6 (“Thus, because

transactions . . . are undertaken under an OFAC licensing scheme, they are

unblocked and not subject to attachment.”); Bank of N.Y. v. Rubin, 484 F.3d 149,

150 (2d Cir. 2007) (determining that assets blocked pursuant to an Executive

Order, but also subject to an OFAC general licensing scheme, were not blocked

and therefore were not subject to attachment under the TRIA). Consequently,

the TRIA could not be applied to those funds since they no longer qualified as

blocked under that statute.

iii. The TRIA does not trump the criminal forfeiture statute.

The Rubins argue that, even if HLF’s assets do not qualify as blocked, they

should still prevail because the provisions of the TRIA trump the criminal

forfeiture provisions of 21 U.S.C. § 853. The Rubins’ argument is premised on

the language in § 201 of the TRIA, which requires its application

“notwithstanding any other provision of law.” See supra note 5. This phrase, the

Rubins argue, operates to override all other statutory limitations on attachment

and execution of blocked assets by judgment creditors. Under this reading, the

Rubins would be able to execute against HLF’s restrained assets even though

the assets were no longer blocked under any of the sections explicitly delineated

by the TRIA. The government responds that the “notwithstanding” clause does

not have the sweeping effect ascribed to it by the Rubins and can operate only

to override conflicting statutes. As § 853 does not conflict with § 201 of the

TRIA, the government contends, the “notwithstanding” clause does not preclude

the application of § 853’s criminal forfeiture provisions. We agree.

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In accordance with the holdings of other courts of appeals, we previously

have noted that the “notwithstanding” clause only applies when another

provision of law conflicts with the TRIA. See, e.g., Hegna v. Islamic Republic of

Iran, 376 F.3d 485, 494 n.34 (5th Cir. 2004) (observing that the

“notwithstanding” clause did not compel the application of the TRIA because the

other statute at issue did not conflict with the TRIA); Smith, 346 F.3d at 271

(“[T]he notwithstanding clause applies only when some other provision of law

conflicts with TRIA.” (citation and internal quotation marks omitted)); United

States v. All Funds on Deposit with R.J. O’Brien & Assocs., 892 F. Supp. 2d 1038,

1051 (N.D. Ill. 2012) (“[The TRIA] effectively supersedes all laws with which it

actually conflicts.” (emphasis added)).

According to the Rubins, 21 U.S.C. § 853 conflicts with the TRIA because

the application of § 853 and the corresponding grant to the government of a

license to restrain HLF’s assets prevented the Rubins from executing against

those assets. Since HLF’s assets were blocked under the IEEPA before the

government exercised its forfeiture power, the Rubins contend that the assets

remained effectively blocked and thus were subject to execution under the TRIA.

The district court agreed, finding that once HLF’s property was blocked, the

“Government [and the] defendants . . . treated and considered the property

‘blocked’ until the time HLF was convicted. For these reasons, the Court

considers the [property] ‘blocked’ at the time the court entered judgment for the

Rubins, in September 2004.” Holy Land Found., 2011 WL 3703333, at *6

(emphasis added). The Rubins’ argument and the district court’s judgment,

however, find conflict between two statutes where there is none and grant undue

power to the “notwithstanding” clause.

Section 201 of the TRIA “operates to empower a plaintiff with a ‘judgment’

against a ‘terrorist party’ to execute against any ‘blocked assets’ of that party.”

Smith, 356 F.3d at 271 (quoting TRIA § 201(a)). As discussed above, HLF’s

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assets were not blocked at the time the Rubins obtained their judgment. The

fact that the government and the parties “treated and considered” the assets as

blocked throughout the criminal trial, Holy Land Found., 2011 WL 3703333, at

*6, does not make them so. Since HLF’s assets already had been restrained

under 21 U.S.C. § 853(e) at the time the Rubins received their judgment, the

Rubins’ right under the TRIA to execute against those funds never became

effective and therefore did not create a conflict between the statutes. Without

such a conflict, the “notwithstanding” clause does not operate to preclude the

government’s restraint of HLF’s assets in anticipation of criminal forfeiture

proceedings.

The Rubins’ argument about the breadth of the “notwithstanding” clause

is similarly unavailing. In their brief, the Rubins advocate an interpretation of

TRIA § 201’s “notwithstanding” clause that operates to override all statutes that,

by their purpose or effect, shield assets from attachment or execution.

“Congress’[s] use of the ‘notwithstanding’ language,” the Rubins argue, “was

clearly intended to prevent the Executive branch from using any statute, both

those it had already employed and new provisions it might try to use in the

future, to block enforcement of terrorism judgments.” This sweeping assertion

assumes that the “notwithstanding” clause trumps any other law that has the

incidental effect of removing funds from the reach of judgment creditors.

Were we to adopt the Rubins’ interpretation of TRIA § 201, we would

broaden the reach of the provision by overriding the statutorily supplied

definition of “blocked” assets. See TERRORISM RISK INSURANCE ACT

§ 201(d)(2)(A). The presence of the “notwithstanding” clause does not alter our

responsibility to abide by the definitions provided by Congress in the same

statute. Our role in interpreting the TRIA is to “[g]ive effect to the text congress

enacted,” not to “rewrite the statute to reflect a meaning we deem more

desirable.” Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 228 (2008). The

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definition of “blocked assets” set forth in the TRIA is narrow and does not

encompass those assets that, while not technically blocked, have been rendered

inaccessible to judgment creditors as a result of the operation of another statute.

As HLF’s assets lie outside the scope of this circumscribed definition, we could

not hold that they are “blocked” without thereby altering the meaning and effect

of the TRIA.

Moreover, contrary to the Rubins’ assertions, we need not look to the

legislative history of the TRIA to determine the meaning of the

“notwithstanding” clause. The language of TRIA § 201 is not ambiguous; it

allows a plaintiff with a judgment against a terrorist organization to execute

against that organization’s assets. See Smith, 346 F.3d at 271. The TRIA does

not nullify the prior dispensation of funds that were not blocked at the time the

terrorism victims obtained a judgment in their favor. The “notwithstanding”

clause should not be read to override the operation of other statutory provisions

that do not interfere with the TRIA’s stated purpose. See Hegna, 376 F.3d at 494

n.34 (refusing to apply the “notwithstanding” clause of the TRIA to trump

another statute that did not conflict with the TRIA). In the absence of such a

conflict, the “notwithstanding” clause does not function in the manner proposed

by the Rubins.

Since the statutory language of § 201 of the TRIA is clear, we decline to

look beyond its text for guidance. Milner v. Dep’t of the Navy, 131 S. Ct. 1259,

1266 (2011) (refusing to apply “ambiguous legislative history to muddy clear

statutory language”). The Rubins have failed to present compelling evidence in

the text of the statute or in caselaw interpreting the statute to convince us that

the “notwithstanding” clause has their desired effect. We therefore hold that

§ 201 of the TRIA does not trump the criminal forfeiture provisions of 21 U.S.C.

§ 853.

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C. Jurisdiction over HLF’s assets

Finally, the Rubins assert the in custodia legis doctrine to challenge the

district court’s jurisdiction to seize HLF’s forfeitable assets. This doctrine

dictates that, where “a court of competent jurisdiction takes possession of

property through its officers, that property is withdrawn from the jurisdiction

of all other courts which, though of concurrent jurisdiction, may not disturb that

possession.” In re Rehkopf Mattress Sales, Inc., 479 F.2d 67, 70 (5th Cir. 1973).

At the time the government initiated forfeiture proceedings against HLF’s

assets, many of those assets were in the custody of the District Courts for the

Southern District of New York and the Western District of Washington.6 The

Rubins maintain that, applied to the facts, the doctrine prevents the District

Court for the Northern District of Texas from executing against HLF’s assets

because those assets are in the custody of courts in other jurisdictions.

The Rubins are foreclosed from raising this argument because it is an

impermissible third-party challenge to the forfeiture of HLF’s assets. See

21 U.S.C. § 853(n). Section 853(n) provides only two avenues of relief in an

ancillary proceeding, and both require a party to establish an ownership interest

in the forfeited funds. See supra Section III(B)(i). The advisory committee notes

to Federal Rule of Criminal Procedure 32.2 further counsel that § 853(n) “does

not involve relitigation of the forfeitablity of the property; its only purpose is to

determine whether any third party has a legal interest in the forfeited property.”

FED. R. CRIM. P. 32.2 advisory committee’s note. The Second, Eighth, Tenth and

Eleventh Circuits have all agreed that a third party has no standing to challenge

a preliminary order’s finding of forfeitability. United States v. Davenport, 668

6

In early 2005, federal courts in New York and Washington issued writs of execution

on the Rubins’ judgment against Hamas, thereby placing many of HLF’s assets within the

legal custody of those courts. Presently, those funds remain in the custody of federal courts

in New York and Washington.

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F.3d 1316, 1321 (11th Cir. 2012) (“The Advisory Committee Notes to the 2000

adoption of Rule 32.2 state the ancillary proceeding for third-party claimants

‘does not involve relitigation of the forfeitability of the property,’ which has

already been ordered in the criminal case.”); United States v. Porchay, 533 F.3d

704, 710 (8th Cir. 2008) (“Section 853(n) does not give a third party the right to

challenge the legality of the seizure; the plain language of the subsection

indicates that its purpose is to ensure that the property is not taken from

someone with a right to the property that is superior to the defendant.”); see also

United States v. Andrews, 530 F.3d 1232, 1236–37 (10th Cir. 2008); DSI Assocs.

LLC v. United States, 496 F.3d 175, 184–85 (2d Cir. 2007). HLF is the only

party that has standing to challenge the forfeitability of its assets. Since HLF

has not challenged the forfeitability of its assets in this appeal, the issue is not

before us.

Even if HLF had brought a challenge to the forfeitability of its assets

under the in custodia legis doctrine, that argument would be precluded by the

terms of the criminal forfeiture statute. The relevant provision, 21 U.S.C.

§ 853(l), states that “[t]he district courts of the United States shall have

jurisdiction to enter orders as provided in this section without regard to the

location of any property which may be subject to forfeiture under this section or

which has been ordered forfeited under this section.” This reasoning is in

alignment with the accepted tenet that criminal forfeitures are in personam

judgments. See United States v. Casey, 444 F.3d 1071, 1075 (9th Cir. 2006).

Thus, the district court’s power to enter orders regarding HLF’s property located

outside of its jurisdiction “derives from its personal jurisdiction over the

defendant,” United States v. Gilbert, 244 F.3d 888, 920 (11th Cir. 2001), and is

not “dependent upon seizure of a physical object,” United States v. Ursery, 518

U.S. 267, 289 (1996); see also United States v. $814,254.76, in U.S. Currency,

Contents of Valley Nat’l Bank Account No. 1500-8339, 51 F.3d 207, 211 (9th Cir.

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1995) (“Thus, the defendant in a criminal forfeiture proceeding is the person, and

the defendant in a civil forfeiture proceeding is the particular property.”). In this

in personam proceeding, the district court’s jurisdiction over HLF, and not its

jurisdiction over HLF’s assets, is the dispositive factor in assessing whether

those assets are available for criminal forfeiture to the government. As such, the

in custodia legis doctrine does not preclude the district court’s in personam

jurisdiction over HLF.

IV. CONCLUSION

The Rubins have failed to demonstrate that they are entitled to recovery

under either 21 U.S.C. § 853 or § 201 of the TRIA. Furthermore, contrary to the

Rubins’ and the district court’s arguments, the provisions of the TRIA do not

trump those of § 853, where, as here, the government had received a license to

restrain terrorist assets for criminal forfeiture proceedings prior to the victims’

civil judgment against the terrorist organization. We REVERSE and REMAND

for proceedings not inconsistent with this opinion.

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